A few hard truths

In the land where entertainment and sports news get much more attention, a few hard truths need to be communicated. On the first Saturday of the new year, here are a few of those truths.

Our capable intelligence community is convinced with a high degree of certainty that Russian elements influenced the 2016 Presidential election and continue to sow seeds of discord to disrupt the US. This is a continuing attack on the US by a foreign entity that our President and this Congress have largely chosen to ignore. My suggestion is to ask your Congressperson, Senators and President what they plan on doing about it?

The US Tax Plan was passed to a lot of fanfare and chest beating under the guise of stimulating the economy, but it still needs a larger sales job on disbelieving Americans. Giving a lot of money to rich people and corporations is supposed to trickle down, yet do we need to add $1.5 trillion more to an increasing debt? Do we need to further stimulate an economy that has had 103 consecutive months of economic growth dating back to June, 2009? Do we need to stimulate an economy that just posted 2 million added jobs for the seventh year in a row, with a continuing run up of the US stock market? Nonpartisan economist groups have posed the same questions.

Let me get this straight, is the Republican Party for states rights or for federal rights? It seems to differ based on where the power lies. The White House has announced that 95% of coastal areas will be subject to offshore drilling to the dismay of governors who want to foster their tourism and fishing industries. Further, the Attorney General wants to crack down on states who are now selling regulated medical and retail marijuana changing an earlier Obama order to allow states to do this. Both of these decisions are getting heavy nonpartisan pushback from state leaders and it is my understanding the White House was asked not to do this.

Finally, the US continues to declare the cut in funding to countries that do not cooperate with us. This is not necessarily new, but we seem to be bullying others more and to what end? We are not the biggest funders to these places and China, India and Russia are easily picking up more influence as we decrease ours. The Pakistan PM basically said it is not a big deal if they lose US funding. The question to ask as we beat on our chest, is who are we trying to convince, the other country or a base of uninformed voters?

That is all I have for today. Unfortunately , the answers to these points can be summed up in one ugly word, “politics.” Have a great weekend and 2018. One thing is for certain is it will be interesting one.

Side of the Angels

A CFO once said during a meeting I was involved with “at least we are on the side of the Angels.” He was referring to a decision a Committee had made which was a conservative reading of the law. If they were wrong at least they would not be at risk.

I use this example as many decisions are made these days that run counter to what experts using data and analytics might say should be done. A good example is happening as of this writing in the US Congress. A law is being passed which goes against what several nonpartisan economic and budget organizations are saying will happen. It is also being sold as more than it is, which is a windfall for wealthy people and investors. These lawmakers are not on the side of the Angels on this issue.

Earlier this year, the President of the United States decided to pull the US out of the Paris Climate Change Accord. As a result, our country was not invited to a conference last week to plan ahead. We are the lone country in the world that will not be in the accord. Ironically, the accord permitted flexibility to reshape how we comply, so leaving was merely a political statement. Being a lone wolf on one of the two most important topics in the world does not leave us on the side of the Angels.

We must do our homework and make decisions based on data, analytics and nonpartisan opinions of experts. Making decisions off rhetoric and lobbyists’ wishes   tends not to be on the side of the Angels.

 

 

A few financial retorts

In an effort to pass a Tax Bill in the US that heavily favors the wealthy and increases the US debt, I have heard several platitudes that are no truer today than when they were first uttered years ago. Here are just a few odds and ends to sink your teeth into.

When a politician tells you a tax cut will pay for itself, the follow-up question is  why don’t we do away with all taxes then? The current tax bill has been projected to fuel only 1/3 of the cost of the tax reduction, which is a little higher than average tax cuts yields.

Most CEOs have said they will use the tax break to buy back shares, pay higher dividends and retain key executives with better incentives. The answer we were promised by legislators is they would spend it on their business investments. These folks are sitting on cash already, so if they are not investing now, when?

By the way, when a company says it is going to buy back shares, more often than not, that is a sign of weakness. In essence, management cannot figure out how to grow the numerator (earnings), so they lessen the denominator (outstanding shares). This is a less risky way to prop up EPS growth and gain a greater incentive payment.

I have talked ad nauseum about the US debt which is being ignored. As we see it grow by more than $10 trillion over the next ten years, at some point there will be a huge day of reckoning and all previous politicians will and should be held accountable. We will see some deck chair moving on our Titanic, but we are well past ignoring this problem. If a Republican tells you they are a deficit hawk, tell them that does not appear to be true.

Finally, the last major Tax Reform was in the mid-1980s. It was a bipartisan effort that took about four years to do, led by some of the smartest tax folks in the Senate and House. These Tax Bills are not bipartisan, have been rushed through without hearings, are not popular and are not authored by folks of the same caliber as before. This speaks volumes.

But, no one is listening to the push back. Talk is cheap. We are about to pass an unpopular Tax Bill that largely benefits corporations and the wealthy and adds to our building debt problem. And, the folks who will bear the brunt of this are the people in poverty and middle class. Please speak with your Senators and Congresspeople. Ask them not to pass any Tax Bill that will increase the debt. And, remember it is easy to pass a tax cut; the opposite is where it gets hard.